Heath copied Labour - and look what happened

By Simon Heffer

12:01AM GMT 07 Dec 2005

There are few things more tiresome than a pile of statistics. That is why innocent people find the increasingly autistic performances of Gordon Brown, as he seeks to defend his record of infallibility on economic matters, so depressing. I don't want to play that game, but I would like to offer just two statistics from the real world by way of encouraging the new leadership of the Conservative Party to think seriously - quite possibly for the first time - about the economic future of our country.

The first is that China, which according to the most recent figures accounts for 13 per cent of global output (four times its share of 1980) will, in a decade's time, account for 19 per cent. That would rank it equal with America and two per cent above the combined 25 countries of the present EU.

The second is that public spending, which when Labour came to power was £322.1 billion a year, will by 2007 have risen to £580 billion. As Ruth Lea of the Centre for Policy Studies points out in her recent analysis of Mr Brown's policy, that means total public spending in current prices will, over Labour's first decade, have risen by 80 per cent, when the cumulative increase in consumer prices in the same period is below 20 per cent and the increase in the retail price index is under 30 per cent. Mrs Lea supplements this already horrific fact with the observation that total public spending as a proportion of GDP has increased from 38 per cent in 2000 to 42 per cent in the current financial year, the most rapid increase in any advanced country.

The grief this will bring Mr Brown is already apparent, with the retail sector kneecapped, consumer spending falling, tax receipts plunging with them, productivity nosediving, and a vicious circle of ever higher taxation to shore up ever higher spending well under way. This can either be a severe problem for Mr Brown, as he tries to ward off his obvious embarrassment at having been proved both wrong and incompetent, or it can be a career-crippling, administration-toppling, terminal disaster for him. The choice is the Conservative Party's.

The last Tory economic policy was in the manifesto written earlier this year by David Cameron. It helped the Tories achieve a third election defeat of eye-watering proportions. It promised a tax cut of £4 billion which, as my colleague Jeff Randall has observed, is, on a total spend of £518.6 billion, merely a rounding error. It blithely accepted Labour's unsustainable and profligate levels of spending as a starting point, and offered to increase them, but by less than Labour plans to do. The Government has used its awesome levels of spending to put about 750,000 people on the public payroll since 1997.

Some are in front-line jobs, being doctors, nurses, teachers or policemen. The vast majority are not, but work in entirely unproductive occupations (outreach workers, regulators, performance monitors, diversity officers etc etc) self-parodied each week in the Guardian's public appointments section. So what the Tories were effectively saying at the last election was this: we will keep Labour's level of spending, because we will keep their client state, because that appears to be the new consensus and, frankly, we don't want to rock the boat.

This is akin to what happened to the Conservative Party in the 1960s and 1970s, culminating in the humiliation for Ted Heath and the Heathmen in 1974-75. The consensus then said: spend highly, have a prices and incomes policy, pretend that inflation is caused by the trades unions' wage demands and not by governments debauching the currency, and above all placate what Labour dictates is mass public opinion. Paradoxically, the nadir of this socialist policy was reached by Heath and not Wilson, with his neo-Stalinist three-phase prices and incomes policy in 1972-73. Today's Tories might claim that they are in no danger of emulating such a catastrophe. That is not, though, how things currently look.

The economic section of Mr Cameron's manifesto this year was based on the same principle as Heath's economic ideas in 1972-74: accept a new consensus shaped by the Labour Party. Now, perhaps any day, in the first flush of shadow power, the Opposition will outline not a policy - we should not be so naive as to expect that - but broad, coherent and intellectually sustainable principles of economic management that at least show that the Conservatives are not in the business of maintaining Labour's client state, and all the prosperity-wrecking garbage that goes with it. As Norman Blackwell, chairman of the CPS, has recently argued, the right question is not "can we afford to cut taxes?" but "can we afford not to cut taxes?". This is the essential position from which a Conservative Party must begin, if it hopes to govern a country that can, in a decade's time, compete with China.

Lord Blackwell has argued for a programme of tax cuts costing £30 billion, to include the raising of thresholds, the end of Mr Brown's tax raid on pension funds, the abolition of inheritance tax and a cut in employers' National Insurance contributions. This would assist wealth creation and impose the discipline needed to curtail the growth of the public sector. It would also be affordable if public spending grew by half a per cent less than growth in GDP. Given the waste in which Mr Brown has engaged, a radical Tory administration could quite easily afford a package of cuts larger than that: a proper audit of the payroll in the public sector, in both central and local government, and a concerted plan for deregulation and de-bureaucratisation would reap even larger savings. The important point is, however, that no responsible government committed to business, enterprise, growth, competitiveness, personal prosperity and freedom of the individual can afford not to do this, or something very much like it.

Mr Brown dishonestly blamed the rise in oil prices for the slump in growth when he made his statement on Monday. The real reasons are instead to be found in the consumer slowdown caused by the shrinking disposable incomes of the British people - they are not just being taxed more, but are being forced to start to repay the mountain of debt that Mr Brown encouraged them to run up because of his cavalier approach to the money supply. Also, as the OECD has pointed out in a recent report, if you remove funds from the private sector that might be used for economically stimulating activities such as investment or consumption, and spend them instead on recruiting new Labour voters to Mr Brown's client state, the consistently improved productivity on which growth relies becomes an object of fantasy.

It is as simple as this. In all that passes for his current economic policy, Mr Cameron has said that a growth dividend will be shared between tax cuts and the public services. First, he needs to realise that there will be no growth unless any administration of his engages in a massive act of redistribution from the public to the private sector. Second, he needs to observe that billions have been pumped into the public services by Mr Brown, and they have become steadily worse. Money is no longer the answer: obtaining value through good strategic and micro-management in those services certainly is.

Michael Portillo, whose political successes fail to stick in the memory, has recently advised Mr Cameron not to have any policies. However, as economic strife deepens in the next year or two, he will have to have at least one, and on this very subject. After all, everyone knew within weeks of Margaret Thatcher's election as leader of the opposition that she meant to curb the power of the state and restore money to the people who had earned it, and that did her no harm. Mr Cameron's choice is between turning us into an aggressively competitive, prosperous economy, and managing decline in the miserable way some of his predecessors so gladly did. I suspect the British people, as they travel more widely and see a world of ever-growing riches, have had enough of decline. And a programme that promises them all jobs in call-centres policed from Beijing is unlikely, we must suppose, to be the great election-winning big idea the public now confidently expect from Mr Cameron.